Cryptoassets have held up well this week, despite the weakness in traditional assets. Bitcoin will also experience reduced selling pressure from Mt. Gox which extended its deadline for rehabilitation creditor repayments by one year to October 2024. The defunct crypto exchange could distribute up to 141,686 BTC to creditors whose funds were lost nine years ago. After a slow summer in venture capital deals, it was a busy week in fundraising announcements given at least 10 venture deals. US equities look set to end the week lower amid a more hawkish Fed and concerns around persistent inflation as well as growing US fiscal deficits. The Fed-fueled slide did not spare European stocks which experienced the worst weekly drop since August. In fixed-income, US government bonds are heading for a third year of of losses, with 10-year US Treasury yields exceeding 4.5% for the first time since 2007.
While the US Fed kept rates unchanged in line with expectations, the board’s hawkish signaling weighed on on both equities and bonds. The quarterly “dot plot” was also released, which showed that the majority of FOMC participants see one more rate hike in the cards for 2023 but only about 75 basis points in cuts priced in for 2024. Fed officials also see stronger economic growth for this year, expecting a 2.1% growth in real GDP vs. its 1% forecast in June. Meanwhile, activity in the US services sector is heading toward contraction after an eight-month low. The flash services purchasing manager index (PMI) reading came in below expectations at 50.2 in September – a reading below 50 indicates contraction. Similarly, eurozone private-sector activity has continued to shrink in September for a fourth consecutive month. Weak eurozone PMI data came in at 47.1 in September, suggesting that economy contracted in the third quarter.
In the digital assets space, the recent trend of sovereign Layer 1 chains moving to Ethereum continued this week. Cosmos-based blockchain Canto and leading Polkadot chain Astar have both announced that they will be transitioning to Ethereum as Layer-2 (L2) solutions. L2 is a collective term to describe a specific set of Ethereum scaling solutions. L2s in turn build on top of L1s such as Ethereum. Examples of L2 projects include optimistic and ZK “rollups” on Ethereum and the Lightning Network on Bitcoin. Canto’s migration is aimed at improving scalability and interoperability between different blockchain networks. Canto Commons has agreed to build an Ethereum ZK rollup utilizing the Polygon Chain Development Kit (CDK). Similarly, major Polkadot parachain Astar which focuses on the Japanese market also announced that it will expand by building its own Ethereum Layer-2 scaling solution, Astar ZK-Ethereum Virtual Machine (EVM), which will also use Polygon’s CDK.
In July, Celo proposed to ditch its own standalone L1 blockchain for a L2 network on Ethereum. A vote by Celo developer CLabs to transition the network from an independent to an L2 solution passed in late July. The blockchain platform is now exploring migrating from its standalone blockchain to an Ethereum L2 network, potentially also using the Polygon CDK. The change aims to simplify liquidity sharing between Celo and Ethereum while boosting security and enabling a seamless developer experience, according to the proposal post.
Another interesting development was the unveiling of Eclipse’s mainnet architecture. The customized L2 scaling solution will be build using a modular architecture, including the Solana Virtual Machine (SVM) for transaction execution, Celestia for data availability, Ethereum for settlement and RISC Zero for zero-knowledge (ZK) fraud proofs. Fees on the network will be facilitated in ETH but the project also plans to launch a governance token in the future. According to the developers, the design allows the L2 to enjoy higher throughput and lower fees than many of its competitors.
Market Overview
The global cryptoasset market capitalization currently amounts to almost $1.1 trillion – compared with $1.09 trillion last week, with bitcoin accounting for 47.4%. Among the Top 30 cryptoassets by market cap, Toncoin (TON) outperformed yet again, gaining another 14.1% over the week. The price of bitcoin (BTC) rose slightly by 0.7% to $26,552 and the price of ether (ETH) fell by 1.9% to $1,591. The total value locked (TVL) in DeFi is sitting at roughly $38 billion, with Ethereum (excluding Layer 2s) currently accounting for about 54.5% of TVL.
This Week’s Headlines
- Citi expands digital asset services with bond custody, tokenized deposits
- Grayscale Investments files for new ether futures ETF, WSJ reports
- Stanford University plans to return millions of dollars received from FTX, Bloomberg reports
- Nomura‘s crypto arm launches long-only bitcoin exposure fund
- Crypto arm of Standard Chartered launches staking service
- India ranks second in global cryptocurrency transaction volume, according to new Chainalysis report
- Optimism announces new $26 million airdrop to over 31,000 addresses
- Mt. Gox extends deadline for rehabilitation creditor repayments to October 2024
- Payment app Venmo to offer PayPal USD stablecoin
- Tim Draper unveils a new crypto-centric venture studio, Draper Goren Blockchain (DGB)
- Mark Cuban loses $860,000 of crypto to wallet phishing attack
Notable Deals and Fundraising
- Crypto VC Blockchain Capital scores $580 million for two new funds
- Tether makes strategic investment in German data center services provider Northern Data Group
- Bitcoin mining rig maker Bitmain plans to invest $54 million in bankrupt Core Scientific
- “Pirate Nation” studio Proof of Play raises $33 million to build fully on-chain games
- Bastion, a startup co-created by two former a16z crypto executives, raises a $25 million seed round
- Digital asset services provider Mesh raises $22 million in a Series A round
- Blockchain tech firm Jiritsu secures $10.2 million to develop verifiable computing
- GRVT raises $7.1 million at $39 million valuation to build hybrid crypto exchange
- Crypto analytics platform CoinScan raises $6.3 million in funding
- Essential raises $5.15 million to build intent-based infrastructure
- Freatic secured $3.6 million in a funding round led by a16z crypto for a decentralized information markets protocol
- Blockchain data visualization firm Bubblemaps raises $3.2 million in seed funding
- Lens Protocol-based Web3 social app Orb raises $2.3 million
- Alchemy Pay co-founder launches $60 million VC fund with former Lightspeed, Harmony execs as partners
